Asset Accumulation, Finance and Trust

Discussion of Video Presentations Thursday 27th August 15:30 – 16:30

Chair: John Morris

Terhi ChakhovichMarja-Liisa Kuronen, and Johanna Moisander – “Investment Risk as Vulnerability: The Context of Repairing Trust in CEO Public Communication

Trust has been seen as important in the financial markets. The business of companies involves risk by nature, and investors assume the existence of such risk, even sometimes aim for risk,  while such risk is being evaded in executive communication. We treat investors as trustors, vulnerable to investment risk, and company CEOs as trustees. Our context is CEO public communication in formal CEO statements. We draw on Levinas (1985, 1987, 1995) and build a theoretical perspective on trust repair within which discursively managed risk is a relational construct between CEOs and the implied readers of CEO statements, i.e., investors here. We find two strategies by CEOs: “vulnerability destruction”, a denial of investor risk, and “vulnerability management”, the careful delineation of investor risk. While the purpose of the first strategy is to decrease apparent investor vulnerability, the purpose of the second is to make vulnerability that cannot be decreased to feel more bearable by investors. We thus show how investory vulnerability is decreased but also carefully celebrated. Trust is valorized as not only an embodiment of “rational” investment decisions but as a construct to connect investors and CEOs as human beings, producing hubris on a “togetherness” in the financial markets. This is to allow forgiveness from investors and the shielding of individual CEOs from excessive personal consequences in case of failure, but also to produce financial markets discursively as less vulnerable overall and as a playing field of supreme actors.

Alesja SeradaJori GrymJ. Tuomas HarviainenTanja Sihvonen – Cryptocurrencies as Technologies of (Dis)Trust

Cryptocurrencies are often proposed to abolish formal institutions and expert systems (Tapscott & Tapscott 2016; Vidan & Lehdonvirta 2019). Adoption of cryptocurrencies was supposed to be initiated by the aftermath of the 2007 global financial crisis, which led to general decline in systemic trust (Roth 2009). The Edelman reports (Edelman Public Relations 2016; 2020) are often cited to prove public distrust in banks. However, based on their data, trust in banks already rebounded in the early 2010s, when exchange prices for cryptocurrencies started growing. We suggest here that trust in cryptocurrencies is correlated with trust in existing banking systems (see Tapscott & Tapscott 2016). We support this by historical evidence from Bitcoin adoption, reflected in academic papers (Kow & Lustig 2017; Andersen & Bogusz 2019) and Edelman public opinion reports. We also analyze the topic through the lens of trust studies (Giddens [1990] 2008; Blomqvist 1997; Roth 2009; Kroeger 2015). The purpose of our discussion is to demonstrate that trust in currencies is a particular case of the systemic trust that ties modern societies together (Giddens [1990] 2008). Local and subcultural ‘trust in code’ (Vidan & Lehdovirta 2019) or the ‘code is law’ principle (Hütten 2019) cannot replace institutional trust, because it is contingent on it. Cryptocurrencies are trusted when they become a part of the same system that they are supposed to disrupt, despite the intention of many cryptocurrency activists to build a financial system without banks.

Hayley James – Understanding present bias in workplace pension decision-making

While we know that ‘present bias’ influences most adults’ propensity to save, we know little about how it manifests in real life contexts. Further, it has often been assumed that those who save more are less biased towards the present. This paper investigates to what extent people anticipate the long-term future when they make decisions about workplace pensions and how this impacts their saving behaviour (if at all). These are important questions in the UK where private pension saving is essential to provide for old age, yet an estimated 12 million people do not invest enough for income adequacy in later life.

The research used qualitative interviews with 42 full time employees aged between 20 and 50 years old. Amongst all participants (including those who paid increased contributions), later life was considered to be a distinct and uncertain phase in the long-term future and most participants were unable to predict what retirement might be like for them. This meant that thoughts about the future were disconnected from their pension saving decisions. Instead people focussed on what they felt they could afford in the present, prioritising stability in their living circumstances in the present and foreseeable future before thinking about longer-term horizons. Those who enjoyed greater stability in the present, for example, in terms of finances, career or family situation, felt more able to save. What has previously been identified as an unconscious ‘present bias’ is instead a conscious and culturally constructed mechanism that effectively embeds everyday privileges into long-term savings.

Hanna Szymborska – Patterns of wealth accumulation and inequality at the intersection of gender and race in times of financialisation

Drawing from the literature on critical finance, intersectionality, and financialisation, this paper analyses patterns of gender and racial wealth inequality in light of financial sector liberalisation in the USA since the 1980s. By determining access to different types of wealth and their values, securitisation, the subprime lending expansion, and wider liberalisation measures generated disparities in household leverage and asset returns, which were subsequently reinforced by the policy responses to the crisis. This influenced the capacity to accumulate wealth across gender and race and reinforced the patterns of structural discrimination present in the US society. Using the U.S. Survey of Consumer Finances between 1989-2016, the paper analyses the institutional conditions of household wealth accumulation by examining how access to different types of wealth contributed to the gender wealth gap for single households, compared to the typically analysed factors related to saving capacity. Homeownership is found to have an alleviating impact on gender wealth inequality, while differences in earnings and access to financial investment assets are associated with increasing wealth disparities. The paper also investigates intersectional inequality, establishing higher wealth disparities across race than gender, and a generally reinforcing race and gender effects for female households of colour. Single households headed by Black and Latino women are found to experience a double penalty of their race and gender, with significantly lower wealth levels compared to single households headed by White men, which is driven primarily by differences in homeownership prior to and in the aftermath of the 2007 crisis.